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Don't Get Sued For Fake Holiday Discounts

By Aditi Mukherji, JD on December 02, 2013 | Last updated on March 21, 2019

In some ways, the consumer quest for massive holiday deals and discounts has left business owners with no choice but to spiral into a deep discount abyss and engage in a Black Friday arms race. The constant question they face is akin to a ruckus game of limbo: how low can you go?

Many big retailers have circumvented the issue by offering "fake discounts." They work backward with their suppliers to set starting prices that, after all the markdowns, will yield the profit margins they want -- but still give consumers the impression of a blowout sale, according to The Wall Street Journal. The problem is that fake holiday discounts and deals could potentially constitute a deceptive business practice.

Here are three potentially deceptive Black Friday discount schemes that can make your business see legal red:

  1. Promising something you can't really offer. Most states prohibit businesses from advertising an offer or product with no intention of honoring the offer or selling the product at that price. Groupon was recently sued for bait-and-switch advertising when it allegedly lured customers in with promises of certain Groupon coupons that didn't actually exist.
  2. Making sky-high markups. Don't significantly mark merchandise up just so you can mark it down. Sure, it's a great way to get consumers to think they're getting a great deal, but such practices -- including exaggerated former price and competitor price comparisons -- can constitute deceptive pricing, according to the Federal Trade Commission.
  3. Offering bogus "BOGO" deals. "Buy one, get the second one free" deals are clever traps to get consumers to buy an extra item. The key to avoid legal liability for a "BOGO" deal is to make proper disclosures. Specify whether it's a true "buy-one-get-one" or "BOGO" sale or if each item is actually 50 percent off.

Though the temptation may be strong, small business owners should resist the urge to offer shady "fake" deals and discounts on Black Friday. To make sure your discount deal strategy is above-board, you may want to consult an experienced business attorney.

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